Hold Steel Authority of India: target of Rs 120: ICICI Securities

ICICI Securities's research report on Steel Authority of India

SAIL’s Q1FY26 reported EBITDA, at INR 27.6bn, was c.16% short of consensus estimates. This stemmed from higher other expenses on account of an INR 9.5bn one-time negative impact on inventory valuation, partially neutralised by INR 6.8bn of favourable price/volume mix impact (adj. realisations were up INR 2,800/te). The company also benefitted from INR 1.7bn of positive railway price revision. Adj. EBITDA (excluding one-time inventory and railway pricing) would have been closer to consensus estimates. SAIL sold 4.55mnte of steel including 0.37mnte for NMDC. Going forward, lower realisations (spot realisations are >INR 2,000/te lower) and start of IISCO capex could have an impact on the stock’s price. We re-initiate coverage with a HOLD rating given near-term headwinds.

Outlook

We are valuing the company at 6x FY27E EV/EBITDA (discount to peers due to low growth visibility); we arrive at a target price of INR 120. Re-initiate with HOLD